2022_Fintech M&A Insights

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5 The Changing FinTech Landscape: A Snapshot of M&A Themes and Trends The noticeable pickup in deal activity in the U.S. and abroad, along with the convergence of several important industry trends, point to a very promising period for FinTech M&A. As the FinTech industry rapidly matures, a wave of consolidation is on the horizon. Rapid changes in consumer behavior are leaving traditional banks—particularly smaller regional and community banks—racing to improve their mobile banking platforms and apps. Similar trends are emerging in the insurance sector, where we have seen a proliferation of apps and platforms that allow individuals to apply and shop for policies online. The same is true for consumer investment platforms, which allow individual consumers to access sophisticated investment products such as options and derivatives. FinTech M&A and consolidation will rise to meet consumer demand, as financial institutions buy FinTech companies to add digital services to their offerings and as competing FinTech companies consolidate and acquire other FinTechs to remain competitive in the sector. Consolidation will also allow more established FinTech players to broaden their reach to other areas of financial services. Recent noteworthy examples include JPMorgan Chase's acquisitions of Nutmeg, a U.K. robo-advisor, and OpenInvest, an ESG-focused investment management platform; Fifth Third Bank's purchase of Provide, a digital healthcare banking platform; and Visa's acquisition of Currencycloud, a cross-border payments platform, and its planned acquisition of Tink, a European open banking platform. In 2022, we anticipate that the FinTech M&A landscape will be shaped by three critical factors. First, we will witness a change in the ranks among FinTech firms, with strong and stable companies rising to the top and competitors being acquired. Second, the trend of traditional banks offering more robust mobile services will continue, which will drive more bank acquisitions and partnerships with FinTech companies. Finally, we expect to see greater scrutiny from financial regulators, as the Biden Administration ramps up antitrust and consumer regulatory enforcement.

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